Invoicing: the secret to keeping the cash flowing for small businesses

Tuesday October 4, 2016

Sorry to be the ones to break it to you, but there's no such thing as the Money Fairy. It doesn't grow on trees, either. In fact, every penny coming into your business comes out of someone else's pocket. Getting that money flowing into your business consistently is a huge part of maintaining your cash flow. It might even be your favourite part - but the sad fact is it just isn't going to happen on its own. If you want to get paid, you're going to need to learn how to invoice.

In the strange language of accountants (that collection of electronic clicks and tweets you sometimes hear coming from your finance department), we call it "raising" an invoice. Getting it right is the first step in getting paid, so it's a skill well worth mastering. Here are a few of the basic dos and don'ts:

Do:

  • Raise your invoices as soon as possible after the work's done or the goods are supplied.
  • Use good accounting software like Clear Books. Every invoice needs a reference number.
  • Have a system for settling arguments and solving problems concerning your invoices.

Don't:

  • Skimp on the details. Always include the full run-down of what you're charging for.
  • Throw away your copy. You need to keep full records of all your invoices.
  • Forget about VAT. If you're VAT registered, you've got HMRC rules to stick to when invoicing.

Remember that your invoices aren't just for your own reference. If your customer has particular requirements for what they should say, make sure you give them everything they need. Essential information like payment terms and Purchase Order numbers are just the start of it. Depending on your business and customers, you might also need to specify a payment method, a means of delivery and other details like your VAT registration number.

Another thing to keep in mind is that mistakes cost money. If there's an error in your invoice that slows down payment, you could easily be looking at a painful kink in your cash flow pipeline. Play it safe by checking every detail before you issue the invoice.

With invoicing, sooner really is better. If your payment terms are 30 days, you can't issue your invoice on the last day of one month and expect to be paid on the first day of the next. Plan your invoicing out ahead of time, and keep track of all the outstanding payment deadlines.

If you're having trouble getting paid on time, you're not alone - but you're not entirely unprotected either. The UK's Late Payment of Commercial Debts (Interest) Act 1998 is there to lean on if your customers are turning a deaf ear to your invoices. You can charge interest on slow payments, and claim compensation for any debt recovery costs you run up. Being a small business doesn't mean being a doormat. Just mentioning the Late Payment Act in your terms and conditions can be enough to make sure you're taken seriously.

As ever, RIFT Accounting is here to solve all your invoicing problems. Your Clear Books software package takes all the drudgery and guesswork out of the process, and we're always ready with a friendly ear if you've got questions or worries. Until next time - invoice early, protect your cash flow and listen out for more Voices from the RIFT...

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